5 Important Things You Need To Know About Severance Agreements

Posted on December 22, 2014 by

For an employee, the possibility of being fired or laid off is a terrifying proposition. The loss of employment brings with it the stress of figuring out how to pay for all of the necessary expenses that we face in life, whether it is food, car payments, phone, utilities, insurance, rent or a mortgage. Some employees may be fortunate enough to be offered a severance agreement. Such an agreement may provide benefits that may relieve or minimize the stress of an employee’s unemployment. Listed below are five things that an employee needs to know about severance agreements that may impact whether he or she enters into a severance agreement.

1. What is a severance agreement?

A severance agreement is a contract entered into the employer and the employee. Under this type of contract, the employer will provide the employee with additional compensation in exchange for the employee’s promise to release any and all possible claims and not sue the employer. In order for the severance agreement to be legally valid, some additional compensation is required.

2. When will an employee be offered a severance agreement?

Certain employees – usually highly compensated ones – may be fortunate enough to have severance included in an employment contract at the beginning of employment or upon being promoted. However, usually severance agreements may be offered when an employer is terminating the employee’s employment, either by firing, resignation or lay off. It is important to note that employers are not required to offer severance to employees unless it already was a term of an employment contract or unless it would result in discrimination to offer it to some employees and not others. Employees may negotiate to terms of the severance agreement. However, technically any attempt to negotiate the severance agreement by making a “counter-offer” can act as a rejection of the severance agreement, in such an event an employer could withdraw the severance agreement. This is a danger of attempting to negotiate. However, most employers will continue to honor the original terms unless better terms are negotiated.

3. Do you have to sign a severance agreement?

An employee does not have to sign a severance agreement. Any evidence that an employee was coerced into signing a severance agreement may make that severance agreement legally invalid. However, if an employee wants to receive the additional compensation promised in the severance agreement, the employee must agree to the terms of and sign the severance agreement.

4. Will your severance payment be taxed?

Yes – severance is considered pay or wages and will be taxes. However, how it is taxed, depends on how the severance payment is paid to the employee. Employees may receive the severance payment in either a lump sum (all at once) or over a period of payments. If the employee receives the severance payment in a lump sum, the lump sum will be treated as a bonus, which means taxes may be withheld all at once on the lump amount. If the severance payment is paid as a salary continuation, received weekly, the severance payment will be taxed more like a weekly paycheck.

5. What is the deadline for you to sign a severance agreement?

If the employee is under age 40, then the Older Workers Benefit Protection Act amendments to the Age Discrimination in Employment Act (“ADEA”) do not apply and there is no minimum time frame. Accordingly an employee under 40 may only have a day or so to accept a severance agreement. If the employee is at least 40 years old and the employer is subject to the ADEA, then the employee must have at least 21 days to consider the severance agreement and 7 days to revoke in order to properly release any ADEA claim.

Seeking Legal Help

If you are contemplating whether or not to sign a severance agreement, you should contact an employment law attorney. The attorney will determine whether or not it is in your best interest to enter into the severance agreement and whether there are any grounds to negotiate a better severance.

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Heather J
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Kia Johnson
Colleen, thank you for taking my case and providing me the closure I needed in settling a medical negligence issue. Because of your diligence and support, I can breathe a lot easier knowing that my experience hasn't gone unnoticed and without liability on the provider's behalf. Your communication and support are appreciated by me and my husband and our family; after many turn-downs from other firms, we are grateful to have found you and your team. I will continue to recommend you to those looking for a compassionate lawyer who will fight for the closure and results that women direly need in whatever situations they face. THANK YOU!!
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Kia Johnson
Anastasia Eddleton
Anastasia Eddleton
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Katie Oakes
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Michelle Bower
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Rene Haines
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Michelle Spencer
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Michelle Spencer
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Chris Perdue
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Melissa Herring
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Brandi Witherspoon
Brandi Witherspoon
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Ashley Halsey
Ashley Halsey
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Bathsheba Colinborough
Bathsheba Colinborough
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Ahmed Rashid
Ahmed Rashid
My wife and I worked with Colleen Quinn and her paralegal Charli (CharSalle) on my daughter's international re-adoption. We are in Fairfax, VA and they were happy to work with us even though we weren’t local to them. Everything was done by email and mail. They answered all of our questions in a timely manner and were very knowledgeable about the process. We worked almost entirely with Charli after the initial emails and phone calls and she was great to work with. They filed all of our paperwork with our court, everything went smoothly, and we received our Final Order. Charli has always kept us in the loop about the process and sent us updates. We mailed original documents back and forth without any issue. Their legal fee was very competitive and better than most attorneys in our own area. We are very pleased with their work and assistance in getting our adoption finalized. I wouldn’t hesitate to recommend them to anyone. Thank you!
Ahmed R
Ahmed R
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Morgan Williams Seay
Morgan Williams Seay
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Nate Davenport
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Bob Stiepock
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Lisa Moore Walker
Personal Injury is a challenging event on many levels in ones life. Have you experienced a moment where you were injured and need to seek legal advice? You need to make a call to Colleen Quinn today. I began to research different law firms that handled Personal Injury. I interviewed several attorneys and spoke with large practices to small firms. I was impressed by Colleens resume and her work with women and the law. I will never regret hiring Colleen and her TEAM. The word TEAM is exactly what I received through out my case. My case was attacked with professionalism and the team was always in communication with me. When I would call to ask questions or to get a better explanation I was always made to feel as if I was the only client. As my case arrived closer to the trail date, my TEAM went into full 110%+ effort and preparation. Colleen was ALWAYS seeking to settle my case with the best outcome that she could. YOU WILL NOT FIND A MORE UPFRONT, HONEST, HARDWORKING-GET IT DONE ATTITUDE THAN THE TEAM OF COLLEEN M. QUINN!! MAKE THAT CALL TODAY-YOU WONT REGET IT!!
beLIeVE Fitness
beLIeVE Fitness
Sharon Robertson Dewitt
Sharon Robertson Dewitt
After doing quite a bit of research on the adoption process, we decided to set up an initial consultation with Colleen, and we found that first session very beneficial and informative. There were many things that impressed us about Colleen from the very beginning: her level of expertise and reputation as an adoption attorney, the accolades she's received throughout her career, her friendly and personable nature, and her willingness to provide us with comprehensive information about the adoption process including projected fees. We also wanted to make sure that we were being well represented and advocated for, and quickly knew that Colleen would not only guide us through the adoption process, but advocate for us as well. Colleen is both passionate about what she does and compassionate toward all parties involved in the adoption process.Colleen’s paralegal, CharSalle (Charli) is an absolute treasure! Charli was readily available to answer questions by phone or by email. She would reach out to us if there was a birth mother interested in speaking or meeting with us after reviewing our profile. We were matched with a birth mother in November 2014, and our daughter was born in February 2015. Colleen and Charli guided us through the initial meetings with the birth parents, the open adoption agreements, and they stayed in touch with us by phone and email when our daughter was born. Our adoption was finalized in six months, and we couldn’t be more pleased with the level of communication we received, and continue to receive, from Colleen and Charli as well as the level of expertise and true passion they have for guiding families through the adoption process. We highly recommend Colleen, Charli, and the staff at Locke & Quinn to anyone considering adoption!!!!
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Joe Ana
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Tierre Christmas
Tierre Christmas
Cathy Tyree Herb
Cathy Tyree Herb
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Chris _
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Kim Miller

 

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